Albers v. Commissioner
United States Supreme Court
414 U.S. 982 (1973)
A & S Transportation Company (A&S) was a closely held corporation with five shareholders (plaintiffs) holding almost all outstanding stock. In order to obtain a loan for replacement of necessary equipment, the bank required additional capital of $150,000. The bank set the terms for the receipt of the capital, and the five shareholders contributed this amount and received preferred stock in exchange. Once the loan was repaid, A&S redeemed the stock for exactly the amount that had been invested by the shareholders, $150,000 in total. The commissioner of the Internal Revenue Service (defendant) treated the redemptions as dividends taxable as ordinary income. The United States Tax Court upheld the commissioner, and the Third Circuit affirmed. The shareholders petitioned the United States Supreme Court for a writ of certiorari.
Rule of Law
Holding and Reasoning ()
Dissent (Powell, J.)
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